San Jose Pension Measure Heading for June Ballot

Comparable to the bygone days of dueling, the time and place for California’s next great pension showdown was set on Tuesday when the San Jose City Council approved a pension measure to go on the June Ballot.

It was an animated and passionate crowd that gathered for the council meeting. They alternated between cheers and jeers, holding signs that read “true” or “false,” depending on whether the measure’s supporters or opponents were speaking. However, for all the political theatre, the final vote went mostly according to predictions with one exception: the final vote was 8-3, not 7-4.

The Council vote leaves the issue of pension reform up to voters.
The path from fiscal solvency to fiscal emergency comprises years of municipal affairs. However, over the last nine months, the City has been working to formulate language for a ballot measure that would dramatically alter the retirement benefits offered to current and future city employees. The path was fraught with legal challenges and intricacies.

According to Mayor Reed, the ballot measure’s construction came from parts of the Little Hoover Commission, the Governor’s Pension Reform Plan, and a 2010 audit of the pension system performed by the San Jose City Auditor.

“The ballot measure also would reform disability retirement rules to prevent abuses, eliminate bonus payments to retirees, and require voter approval for any future retirement benefit increases,” said Mayor Reed in a statement released on Monday. “All together, the ballot measure will save the taxpayers hundreds of millions of dollars over the next 10 years, and much more after that as the percentage of employees in the new plan grows.”

However, the city staff and its Mayor have consistently maintained that they offered the city’s bargaining units a seat at a table, and a role in solutions to the city’s process.

Part of that inclusion is a form of negotiation called a “Seal Beach Bargaining,” which is used when voter actions during an election will impact retirement benefits. Although the city did not reach a deal during the bargaining and negotiating process, the city manager notes in her staff report that the city adjusted their original ballot measure multiple times to incorporate the concerns of its bargaining units.

“I am recommending additional changes to the ballot measure,” wrote city manager Debra Figone in part of the staff report. “These changes are a combination of clarifying language and substantive changes after mediation discussions.”

Even with the changes, the ballot measure marks a substantial departure from the previously dogmatic defined-benefit pension system, instead turning to a hybrid approach that couples a defined-contribution system and social security.

The latest and final iteration of the ballot measure made changes such as increasing the Cost of Living increases in pensions. Originally, the Consumer Price Index would be used to calculate Cost of Living increases, and they would be limited to a maximum of 1 percent, that’s now 1.5 percent.

Also, annual benefit accrual rate would have been capped at 1.5 percent. That’s been raised to 2 percent.

Staff also adjusted how the city and employees would split any unfunded mandate and how much the city would contribute to an employee’s defined-contribution plan.

The language had to be approved by March 9 to be included on a June 5 ballot.